Title Appropriation Bill (No. 3) 2020-2021
Database Explanatory Memoranda
Date 01-06-2021 02:03 PM
Source House of Reps
System Id legislation/ems/r6667_ems_00b6dce2-e0d0-48e2-af4f-5b47d4fca472

Appropriation Bill (No. 3) 2020-2021























Appropriation Bill (No. 3) 2020-2021















(Circulated by the authority of the Minister for Finance,

Senator the Honourable Simon Birmingham)

Table of Acronyms and Defined Terms




Actual Available Appropriation


Advance to the Finance Minister

AI Act

Acts Interpretation Act 1901


Budget Appropriation

Commonwealth entity

An entity as defined in section 10 of the PGPA Act

corporate entity

A corporate Commonwealth entity or a Commonwealth company within the meaning of the PGPA Act


Consolidated Revenue Fund

Finance Minister

Minister for Finance


Goods and Services Tax

non-corporate entities

Non-corporate Commonwealth entities as defined in the PGPA Act, or the High Court


Public Governance, Performance and Accountability Act 2013

portfolio statements

Portfolio Budget Statements and Portfolio Additional Estimates Statements


Appropriation Bill (No. 3) 2020-2021

General Outline

1               This Explanatory Memorandum accompanies the Appropriation Bill (No. 3) 2020-2021 (the Bill).

2               The main purpose of the Bill is to propose appropriations from the Consolidated Revenue Fund (CRF) for the ordinary annual services of the Government in addition to amounts appropriated through the Supply Act (No. 1) 2020-2021 and the Appropriation Act (No. 1) 2020-2021.

3               Appropriations for the ordinary annual services of the Government must be contained in a separate Bill from other appropriations in accordance with sections 53 and 54 of the Australian Constitution (the Constitution). Consequently, the Bill proposes appropriations for the ordinary annual services of the Government. Other annual appropriations that are not for the ordinary annual services of the Government are proposed in the Appropriation Bill (No. 4)
Together these two Bills are termed the Additional Estimates Appropriation Bills.

4               The Portfolio Additional Estimates Statements are published and tabled in the Parliament in relation to the Bill. This Explanatory Memorandum should be read in conjunction with the various 2020-21 portfolio statements (being the Portfolio Budget Statements that accompanied the 2020‑21 Budget and the Portfolio Additional Estimates Statements) which contain details on the appropriations set out in the Schedules of the Bills.

Structure of the Bill

5               The Bill provides for the appropriation of specified amounts for expenditure by Australian Government entities, primarily being non-corporate Commonwealth entities (non-corporate entities) under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

6               Part 1 of the Bill deals with definitions, the interpretative role of the portfolio statements and the concept of notional transactions. Part 2 of the Bill proposes appropriations to make payments of the amounts in Schedule 1 for departmental items (clause 7), administered items (clause 8) and corporate entity items (clause 9). Part 3 of the Bill specifies the Advance to the Finance Minister (AFM) provision (clause 10).

7               Part 4 deals with credits to special accounts (clause 11), provides for amounts to be appropriated as necessary (clause 12), and specifies when the Bill is repealed (clause 13). In addition to the AFM provision in Part 3, clause 12 of the Bill recognises that the appropriations in the Bill may also be varied by the PGPA Act.

Financial Impact

8               The Bill, if enacted, would appropriate the amounts specified in Schedule 1 as set out in section 6.


Statement of compatibility with human rights

1               The Bill seeks to appropriate money for the ordinary annual services of the Government.

2               Accordingly, the Bill performs an important constitutional function, by authorising the withdrawal of money from the CRF for the broad purposes identified in the Bill.

3               However, as the High Court has emphasised, beyond this, the Appropriation Acts for the ordinary annual services of Government do not confer authority to engage in executive action. In particular, they do not confer legal authority to spend.

4               Given that the legal effect of Appropriation Bills is limited in this way, the Bill is not seen as engaging, or otherwise affecting, the rights or freedoms relevant to the Human Rights (Parliamentary Scrutiny) Act 2011.

5               Detailed information on the relevant appropriations, however, is contained in the portfolio statements.



Notes on clauses

Part 1—Preliminary

Clause 1—Short title

1               Clause 1 specifies that the short title of the Bill, once enacted, will be the Appropriation Act (No. 3) 2020-2021.

Clause 2—Commencement

2               Clause 2 provides for the Bill to commence as an Act on the day of the Royal Assent.

Clause 3—Definitions

3               Clause 3 defines the key terms used in the Bill, such as “administered item”, “non-corporate entity”, and “special account”.

Clause 4—Portfolio statements

4               Clause 4 declares that the portfolio statements are relevant documents under paragraph 15AB(2)(g) of the Acts Interpretation Act 1901 (AI Act), which provides for material to be considered in the interpretation of an Act if the material is declared by the Act to be relevant material for the purposes of section 15AB of the AI Act.

5               The purpose of the portfolio statements is to provide information on the proposed allocation of resources to Government outcomes by Commonwealth entities within each portfolio. The term “portfolio statements” is defined in the Bill, at clause 3, to mean the Portfolio Budget Statements (that accompanied the Appropriation Bills tabled at the last Budget) and the Portfolio Additional Estimates Statements tabled in relation to the Bill.

Clause 5—Notional transactions between entities that are part of the Commonwealth

6               Clause 5 provides that notional transactions between non-corporate entities are to be treated as if they are real transactions. Notional transactions, therefore, require the debiting of an appropriation made by Parliament. The payments of the amounts in Schedule 1 from one non-corporate entity to another do not require, in a constitutional sense, an appropriation, because both non‑corporate entities operate within the CRF. For reasons of financial discipline and transparency, the practice has arisen for these payments between non-corporate entities to be treated as though they required an appropriation, and to debit an appropriation when such notional payments are made. This is consistent with section 76 of the PGPA Act.

7               When a non-corporate entity makes a payment, whether to another non‑corporate entity or another part of the same non-corporate entity (such as a different “business unit” within the entity), it is to be treated as a “real” payment. This means that the appropriation made by Parliament is extinguished by the amount of the notional payment, even though no payment is actually made from the CRF. Similarly, a notional receipt in such a situation is to be treated by the receiving non-corporate entity (where relevant) as if it were a real receipt. This does not mean every internal transfer of public money involves a notional payment and receipt.

Part 2—Appropriation items

Clause 6—Summary of appropriations

8               Clause 6 sets out the total of the appropriations in Schedule 1 of the Bill. The amounts in Schedule 1 may be increased by a determination under clause 10 (AFM).

9               The amounts in Schedule 1 of the Bill may be adjusted further in accordance with sections 74 to 75 of the PGPA Act. Specifically:

·                Section 74 of the PGPA Act, when read with Rule 27 of the Public Governance, Performance and Accountability Rule 2014, permits non‑corporate entities to retain certain types of receipts by adding them to their most recent departmental item or other type of appropriation in an Appropriation Act when prescribed.

·                Appropriations may be adjusted by amounts recoverable by a non-corporate entity from the Australian Taxation Office for Goods and Services Tax (GST), in accordance with section 74A of the PGPA Act. The amounts specified in Schedule 1 exclude recoverable GST. The appropriations shown represent the net amount that Parliament is asked to allocate to particular purposes.

·                Section 74A has the effect of increasing an appropriation by the amount of the GST qualifying amount arising from payments in respect of the appropriation. As a result, there is sufficient appropriation for payments under an appropriation item, provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial amount shown against the item in Schedule 1. Section 74A also applies to notional transactions between and within non-corporate entities.

·                Items may be adjusted to take into account the transfer of functions between non-corporate entities, in accordance with section 75 of the PGPA Act. It is possible that adjustments under section 75 may result in new items and/or outcomes being created in an Appropriation Act.

10           Additionally, the Finance Minister manages the payment from items in the Bill by non-corporate entities using a discretionary power under section 51 of the PGPA Act. Section 51 allows the Finance Minister to manage the timing and the amount of appropriated money to be made available to a Commonwealth entity (an entity as defined in section 10 of the PGPA Act), except as required by law.

Clause 7—Departmental items

11           Clause 7 provides that the amount specified in a departmental item for a non-corporate entity may be applied for the departmental expenditure of the non‑corporate entity. Clause 3 defines:

·                “departmental item” to be the total amount set out in Schedule 1 in relation to a non-corporate entity under the heading “Departmental”; and

·                “expenditure” to be payments for expenses, acquiring assets, making loans or paying liabilities.

12           While the departmental items in Schedule 1 may be divided between outcomes, the different amounts against outcomes are notional. The total appropriation for departmental expenses represents the departmental item.

13           Departmental items involve costs over which a non-corporate entity has control. Departmental appropriations can be used to make any payment related to the functions of the non-corporate entity including on purposes covered by other items whether or not they are in the Act for an entity. Expenditure typically covered by departmental items includes:

·                employee expenses, suppliers and other operational expenses (e.g. interest and finance expenses); and

·                the acquisition and capitalised maintenance of departmental assets valued at $10 million or less.

14           The cash to meet departmental expenses may be required at times other than when the expenses are incurred. Departmental items are available until they are spent, or until the Act through which they were appropriated is repealed. Annual Appropriation Acts have a lifespan of up to three years after which they automatically repeal.

15           Generally, if non-corporate entities are directed by Government to perform additional activities, they are expected to meet the cost of the additional activities from their existing appropriations, which may then be replenished by a departmental appropriation in the following financial year. This is known as supplementation and applies when the direction was given, or a decision to propose further appropriations is made, in a timeframe within which it is not practicable to include the expected expenses in a further Appropriation Bill for that financial year.

16           There can also be occasions when a non-corporate entity, such as a portfolio Department, is required to assist with matters in relation to other areas of the Government. Examples can include whole-of-Government activities or a portfolio Department assisting with the formation and initial costs of a new portfolio body (for which the Department might later be supplemented). Another example would be where government has decided to implement shared services arrangements, and one non‑corporate entity is providing corporate services assistance to another non‑corporate entity.

Clause 8—Administered items

17           Subclause 8(1) provides for the appropriation of administered amounts to be applied by a non-corporate entity for the purpose of contributing to the outcome for a non-corporate entity. An “administered item” is defined in clause 3 to be the amounts set out in Schedule 1 opposite an outcome for a non-corporate entity under the heading “Administered”. Administered amounts are appropriated separately for each outcome, so, unlike departmental items, the split across outcomes is not notional. This makes it clear what the funding is intended to achieve.

18           The appropriations for administered items in Schedule 1 represent the amounts required to meet the additional estimated expenses for the administered outcomes for 2020-21.

19           The purposes for which each administered item can be spent are further set out in subclause 8(2). Subclause 8(2) provides that where the portfolio statements indicate a particular activity is in respect of a particular outcome, then expenditure on that activity is taken to be expenditure for the purpose of contributing to achieving that outcome.

20           Administered items are those administered by a non-corporate entity on behalf of the Government (e.g. certain grants, benefits and transfer payments). These payments are usually made pursuant to eligibility rules and conditions established by the Government or the Parliament. Specifically, administered items are tied to outcomes (departmental items are not).

Clause 9—Corporate entity items

21           Clause 9 provides for appropriations of money for corporate entities to be paid from the CRF by the relevant Department. Clause 9 provides that payments for corporate entities must be used for the purposes of those entities.

22           A “corporate entity” is defined in clause 3 to be a corporate Commonwealth entity or a Commonwealth company within the meaning of the PGPA Act. Many corporate entities receive funding from appropriations. However, these entities are legally separate from the Commonwealth, and as a result, do not debit appropriations or make payments from the CRF.

23           Corporate entity payments are initiated by requests to the relevant portfolio Departments from the corporate entity. The Finance Minister manages appropriations for corporate entities through a discretionary power to control the timing and amount made available under section 51 of the PGPA Act, except as required by law. Corporate entities hold the amounts paid to them on their own account.

24           Subclause 9(2) provides that if a corporate entity is subject to another Act that requires amounts appropriated by Parliament for the purposes of that entity to be paid to the entity, then the full amount of the corporate entity payment must be paid to the entity.

25           The purpose of subclause 9(2) is to clarify that subclause 9(1) is not intended to qualify any obligations in other legislation regulating a corporate entity, where that other legislation requires the Commonwealth to pay the full amount appropriated for the purposes of the entity.

26           In addition to the annual appropriations, some corporate entities may also receive public money from related entities such as a portfolio Department and from special appropriations managed by those Departments. Many corporate entities also receive funds from external sources.

Part 3—Advance to the Finance Minister

Clause 10—Advance to the Finance Minister

27           Section 10 of the Appropriation Act (No. 1) 2020-2021 enables the Finance Minister to allocate additional amounts for items when satisfied that there is an urgent need for expenditure, and the existing appropriation in the current year, is not provided for, or is insufficiently provided for. The allocated amount is referred to as the Advance to the Finance Minister (AFM). Subsection 10(3) of the Appropriation Act (No. 1) 2020‑2021 provides that the total amount that can be determined under the AFM provision is $4,000 million.

28           Clause 10 of the Bill provides that irrespective of the amounts issued from the AFM before the commencement of the Bill, the amount available under section 10 of the Appropriation Act (No. 1) 2020-2021 will be restored to the original amount of $4,000 million. The clause ensures that there will be sufficient scope to provide amounts from the AFM for the remainder of the financial year.

29           Subclause 10(1) of the Bill specifies that if the Finance Minister has determined under subsection 10(2) of the Appropriation Act (No. 1) 2020-2021 to increase an amount in Schedule 1 of the Appropriation Act (No. 1) 2020-2021 from the AFM, then that amount is to be disregarded for the purposes of subsection 10(3) of the Appropriation Act (No. 1) 2020-2021 when the Bill commences. From the date this Bill commences as an Act the total amount that can be determined under the AFM will again be $4,000 million.

30           Subclause 10(2) of the Bill prevents appropriations for the same expenditure from both the AFM and the Bill. Subclause 10(2) ensures that if Schedule 1 of the Bill provides an amount for a particular expenditure and, prior to the commencement of the Bill, the Finance Minister determines an amount from the AFM under section 10 of the Appropriation Act (No. 1) 2020-2021 for the same expenditure (the advanced amount), then the appropriation in the Bill will be reduced by the amount of the advanced amount. The appropriated amount cannot be reduced below nil.

31           For example, if the Bill provides $20 million for a grants program and an advanced amount of $5 million is determined by the Finance Minister under the Appropriation Act (No. 1) 2020-2021 for a particular grant payment under that program, then the amount appropriated by the Bill, once enacted, will be reduced by $5 million (i.e. appropriating only $15 million for the grants program).

32           The Finance Minister may continue to make determinations under subsection 10(2) of the Appropriation Act (No. 1) 2020-2021 to add an amount from the AFM to an item of a Commonwealth entity if the criteria in subsection 10(1) of that Act are satisfied.

Part 4—Miscellaneous

Clause 11—Crediting amounts to special accounts

33           Clause 11 provides that if the purpose of an item in Schedule 1 is also the purpose of a special account (regardless of whether the item expressly refers to the special account), then amounts may be debited against the appropriation for that item and credited to the special account. Special accounts may be established under the PGPA Act by a determination of the Finance Minister (section 78) that is disallowable by Parliament or by another Act (sections 79 and 80). The determination or Act that establishes the special account will specify the purposes of the special account.

Clause 12—Appropriation of the Consolidated Revenue Fund

34           Clause 12 provides that the CRF is appropriated as necessary for the purposes of the Bill. Significantly, this clause means that there is an appropriation in law when the Act commences. That is, the appropriations are not made or brought into existence just before they are paid, but when the Act commences. This clause indicates that the amounts appropriated may be affected by the PGPA Act, in particular sections 74 to 75 (see clause 6), after the Act commences.

Clause 13—Repeal of this Act

35           Clause 13 provides that the Bill, once enacted, will repeal at the start of 1 July 2023.

Schedule 1—Services for which money is appropriated

36           Schedule 1 specifies the appropriations proposed for the ordinary annual services of the Government. Schedule 1 contains a summary table which lists the total amounts for each portfolio. A separate summary table is included for each portfolio, with other tables detailing the appropriations for each Commonwealth entity. More details about the appropriations in Schedule 1 are contained in the portfolio statements and the second reading speech for the Bill.

37           Schedule 1 includes, for information purposes, the amount appropriated in the Appropriation Act (No. 1) 2020-2021 and the Supply Act (No. 1) 2020-2021, which is printed in italics and labelled as “Budget Appropriation (italic figures) – 2020-2021”, and a figure for the previous financial year labelled “Actual Available Appropriation (light figures) – 2019-2020”. The Budget Appropriation (BA) and Actual Available Appropriation (AAA) are estimates that do not affect the amount available at law. These figures provide a comparison with the proposed appropriations.

38           The BA and AAA are calculated for each item by adding the amounts appropriated in the relevant financial year’s annual Appropriation Acts, plus any AFMs, and any adjustments under sections 51 and 75 of the PGPA Act. In some instances, the figures may also be affected by limits applied administratively by the Department of Finance. In addition, where an entity’s outcome structure has changed since the last Appropriation Act, only ongoing outcomes may be shown in the Bill. For these reasons, the Actual Available Appropriation figures may be different from the sum of amounts provided in earlier Appropriation Acts.